Kiwisavers get a ‘sidecar’ option
Kiwisavers wanting to save more than the minimum needed to receive their full employer and government contributions are getting a new option that doesn’t involve locking their money away until they retire.
Low-cost, index-tracking fund provider Simplicity will today start taking registrations of interest for its fund range, which will mirror its Kiwisaver scheme, except that the money can be withdrawn at any time.
Simplicity’s launch follows that of Investnow, an online funds supermarket through which people can start saving alongside their Kiwisaver.
The two businesses could solve a conundrum for some investors.
Kiwisaver discourages people from saving more than the bare minimum needed to get their employers’ matching three per cent contributions, and the Government’s maximum $521.43 member tax credit.
That’s because in most cases, the money is locked in until they reach the age of 65.
Simplicity founder Sam Stubbs said its new conservative, balanced and growth funds, which will be invested in low-cost Vanguard index-tracking funds, would open to investors on April 13.
‘‘Simplicity Investments Funds will be managed the same way as its Kiwisaver plan but investors will be able to withdraw their money at any time.
‘‘On average, fees will be 50-75 per cent lower than the industry average, depending on the amount invested.’’
If Simplicity’s savings were applied to the $40 billion Kiwis had invested in non-kiwisaver managed funds, Stubbs said, they would save close to half a billion a year in fees.
‘‘Fees for Kiwisaver funds are already way too high, and managed investment schemes are even worse. Some are just outrageous.
‘‘About one in five of our Kiwisaver members have asked for an option that allows them to withdraw money at any time.’’
The Simplicity funds do have one barrier to entry for investors wanting to use them as a sidecar to their Kiwisaver scheme to speed up their retirement savings.
The first deposit had to be a minimum of $10,000, after which people could set up regular savings, or make voluntary deposits, of any size.
The Investnow online funds supermarket is taking a very different approach.
It, too, offers passive Vanguard funds, for which it is charging a 0.2 per cent fee a year, even lower than Simplicity’s funds, but founder Anthony Edmonds hasn’t limited the range to passive options.
It also offers funds from wellknown active fund managers such as Harbour Asset Management, Mint Asset Management, and Russell Investments, leaving investors to decide whether passive, or active fund management suits them best.
And the minimum investment is just $250.
Like Simplicity, Investnow is also making a play to attract investors on its low fees.
‘‘Many of the fees are at close to wholesale rates,’’ Edmonds said.
Wholesale rates are the price paid by investors with $500,000 or more to invest.
‘‘Having an online site allowing clients to buy, sell and manage their own investments is a nobrainer.’’
And just like with Kiwisaver providers, people can keep an eye on their investments online with Investnow.